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Do we really think that Dish (s DISH) wants to build an LTE-Advanced mobile broadband network? I know that last night it filed a waiver asking the FCC to grant it the ability to use its satellite spectrum to deliver a combo terrestrial and satellite network, but let’s get real for a moment. This isn’t about mobile broadband, it’s about the spectrum. Charles W. Ergen, the chairman of Dish, is making a huge gamble on the hyped-up spectrum crisis, the FCC’s failure so far with LightSquared and a realization that satellite television is going to become an increasingly niche product.
Most people saw Dish’s purchase of the Terrestar and DBSD assets, which he now wants to combine with this FCC waiver, as a way for Ergen to diversify the company’s TV service with a broadband component. Unlike competitors in the cable or IPTV business, Dish doesn’t have its own Internet offering to bundle with video or to fall back on if subscribers decide they don’t want to pay for satellite TV anymore. This speculation has become even more rampant as Dish reported its worst-ever subscriber losses in the second quarter, with 135,000 customers leaving the service.
Spectrum speculation rides again
But by floating this planned 4G network — and LTE-Advanced is truly 4G by the ITU’s original standards — Ergen sees an opportunity to turn Dish’s satellite network into an asset. This is similar to how Harbinger Capital Partners saw its chance to turn its satellite spectrum into a proposed network able to sign customers, raise billions and even act as an example of competition for the wireless industry. If Phil Falcone at Harbinger can turn a small satellite business into a wholesale mobile broadband network with only an FCC waiver and find investors, why shouldn’t Ergen try the same stunt? Heck, sometimes these spectrum speculation ploys even work out. Just look at how well Craig McCaw has done.
But I simply look at this pitch and wonder how far LightSquared and Dish will have to push their wholesale network facade in order to find a willing buyer for their airwaves and networks (both have satellites). Analyst Tim Farrar, who covers companies operating in the MSS satellite band, writes on his blog that the FCC may be inclined to give Dish a chance:
As I’ve pointed out previously, DISH is now in a perfect position to replace LightSquared as the FCC’s favored option for providing additional wireless competition. Indeed DISH highlights specifically in the TerreStar application that “use of the [2GHz] band also does not give rise to the GPS interference issues that have hampered the use of the L-band” which is one of the factors meaning that the “promise of MSS/ATC has yet to be fully realized”. DISH also notes pointedly that it is “a well-financed, capable, and recognized innovator in communications technology [with] unique experience in developing an innovative and competitive retail operation and growing it from zero to approximately 14 million subscribers.”
Are LTE-Advanced and buildout plans a red herring?
Maybe the FCC will grant Dish a waiver and see if it can build a network without interference, but another story at Fierce Wireless points out that Dish isn’t promising much with its network buildout. The story says that while LightSquared promised to cover a third of the population by the end of 2012, Dish appears to be promising far less. To me, its use of LTE-Advanced is also somewhat suspicious, given that there is a lack of commercial gear and chips out for the standard since it was only recently set in March. Clearwire (s clwr) is using LTE-Advanced . . . eventually. And Dish explains that such services would be a commercial option until 2014 anyhow.
I will credit Dish with trying to make its spectrum play as attractively as possible with this filing. It is asking the FCC for several things, including the ability to sell devices that don’t require a satellite-capable chip, which is basically a backdoor to turning its satellite spectrum in the 2 GHz band into terrestrial spectrum. The FCC granted this same waiver to LightSquared earlier this year. It’s also asking to avoid having a spare satellite (those things are expensive and, frankly, useless, since they don’t provide fast mobile broadband without sucking the battery life of a handheld device). Finally, it wants the FCC to extend all the rules that Dish abides by to the Terrestar spectrum so that it can treat the two blocks as one, which turns the 40 GHz of spectrum it has into something it can use to deploy LTE-Advanced in two 20 MHz bands to reap the maximum efficiencies.
However, as Dish points out in its filing, 40 Mhz isn’t much spectrum when compared to the amount held by the nation’s largest wireless carriers. That mean efforts to build out a network would likely involve partners that also need spectrum. I imagine it would be nice if those partners also had a wireless network and a desire to keep building out a business even as AT&T swallows T-Mobile to create a near-duopoly in the wireless space.
It would be even nicer if they could also take advantage of Dish’s TV and broadband businesses to perhaps create a quadruple play that could rival plans that AT&T, Verizon and maybe even cable companies could soon offer. So this filing isn’t so much about Dish wanting to build a wireless network as Dish realizing that having some contiguous spectrum for mobile broadband adds a lot more value to Ergen’s company than his 14 million pay TV subscribers.